Disney’s Acquisition of Comcast’s 33% Stake in Hulu
Disney is on the verge of becoming the sole owner of Hulu, a popular streaming service.
Announced by the media conglomerate, the acquisition of Comcast’s 33% stake in Hulu is estimated to cost $8.61 billion following Comcast’s exercise of its right under the put/call arrangement between the companies. Currently, Disney owns the remaining two-thirds stake in Hulu.
In a statement, Disney stated that acquiring Comcast’s stake in Hulu at fair market value would further its streaming objectives.
As part of the sale arrangement, Disney expects to pay Comcast approximately $8.61 billion by December 1, representing NBCUniversal’s one-third stake of the $27.5 billion guaranteed floor value for Hulu that was established in their agreement in 2019.
However, the final price for the Comcast/NBCU stake in Hulu and thus, Disney’s ultimate payout to Comcast, has yet to be determined.
There is a significant disagreement between the two parties regarding the market value of Hulu. Comcast CEO Brian Roberts mentioned the remarkable value of Hulu at a Goldman Sachs conference on September 6, citing potential synergies that could result in a $30 billion value. This estimation does not even include the value of Hulu itself. Roberts expressed confidence that multiple buyers would be interested in acquiring Hulu in its current state.
To resolve the issue, each company has enlisted bankers to assess Hulu’s fair equity value as of September 30, 2023. Comcast hired Morgan Stanley, while Disney enlisted JPMorgan Chase. If their valuations differ by more than 10%, a third firm will be selected, and the final valuation will be the average of the two closest figures.
Once the equity fair value is determined, Disney will compensate NBCU if it exceeds the guaranteed floor value. This compensation will be made within 45 days of the final valuation. The valuation process is expected to be completed during the 2024 calendar year.
Additionally, according to Disney, 50% of the estimated U.S. tax savings resulting from the acquisition will be shared with NBCU over a 15-year period.
Though Hulu’s growth has slowed, Disney sees it as a valuable long-term asset. Hulu will contribute to Disney’s streaming bundles, including Disney+ and Hulu, by reducing churn and increasing pricing power. Wall Street analysts are skeptical that Hulu is worth significantly more than its minimum value of $27.5 billion set in 2019.
CEO Bob Iger revealed on a May earnings call that Disney+ plans to integrate Hulu content into a unified streaming experience, which surprised Comcast executives.
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